Fiscal Incentives to PEZA-Registered Economic Zone Enterprises

1. Economic Zone Export Manufacturing Enterprise

 Income Tax Holiday (ITH) – 100% exemption from corporate income tax
o 4 years ITH for Non-pioneer Project
o 6 years ITH for Pioneer Project
ITH Extension years may be granted if Project complies with the following criteria, (one criterion is equivalent to one ITH extension year),
provided that the total ITH entitlement period shall not exceed eight (8) years:
> The average net foreign exchange earnings of the project for the first three (3) years of operations is at least US$500,000.00 and,

> The capital equipment to labor ratio of the project does not exceed US$10,000.00 to 1 for the year immediately preceding the ITH
extension year being applied for.

> The average cost of indigenous raw materials used in the manufacture of the registered product is at least fifty per cent (50%) of the total
cost of raw materials for the preceding years prior to the ITH extension year.
o 3 years ITH for Expansion project (ITH applies to incremental sales)

 Upon expiry of the Income Tax Holiday - 5% Special Tax on Gross Income and excemption from all national and
local taxes (“Gross Income” refers to gross sales or gross revenues derived from the registered activity , net of
sales discounts, sales returns and allowances and minus cost of sales or direct costs but before any deduction is
made for administrative expenses or incidental losses during a given taxable period)
 Tax and duty free importation of raw materials, capital equipment, machineries and spare parts.
 Exemption from wharfage dues and export tax, impost or fees
 VAT zero-rating of local purchases subject to compliance with BIR and PEZA requirements
 Exemption from payment of any and all local government imposts, fees, licenses or taxes. However, while
under Income Tax Holiday, no exemption from real estate tax, but machineries installed and operated in the
economic zone for manufacturing, processing or for industrial purposes shall be exempt from real estate taxes
for the first three (3) years of operation of such machineries. Production equipment not attached to real estate
shall be exempt from real property taxes
 Exemption from expanded withholding tax

2. Information Technology Enterprise:

 Income Tax Holiday (ITH) – 100% exemption from corporate income tax:
o 4 years ITH for Non-pioneer project
o 6 years ITH for Pioneer project
ITH Extension year may be granted if Project complies with the following criteria (one criterion is equivalent to one ITH extension year,),
provided that the total ITH entitlement period shall not exceed eight (8) years:
> The average net foreign exchange earnings of the project for the first three (3) years of operations is at least US$500,000.00 and,

> The capital equipment to labor ratio of the project does not exceed US$10,000.00 to 1 for the year immediately preceding the ITH
extension year being applied for.
o 3 years ITH for Expansion project (ITH applies to incremental sales)

 Upon expiry of the Income Tax Holiday - 5% Special Tax on Gross Income and excemption from all national and
local taxes. (“Gross Income” refers to gross sales or gross revenues derived from the registered activity , net of
sales discounts, sales returns and allowances and minus cost of sales or direct costs but before any deduction is
made for administrative expenses or incidental losses during a given taxable period)
 Tax and duty free importation of equipment and parts.
 Exemption from wharfage dues on import shipments of equipment.
 VAT zero-rating of local purchases of goods and services, including land-based telecommunications, electrical
power, water bills, and lease on the building, subject to compliance with Bureau of Internal Revenues and PEZA
requirements
 Exemption from payment of any and all local government imposts, fees, licenses or taxes. However, while
under Income Tax Holiday, no exemption from real estate tax, but machineries installed and operated in the
economic zone for manufacturing, processing or for industrial purposes shall not be subject to payment of real
estate taxes for the first three (3) years of operation of such machineries. Production equipment not attached to
the real estate shall be exempt from real property taxes.
 Exemption from expanded withholding tax.

3. Tourism Economic Zone Locator Enterprise

 Four (4) years of Income Tax Holiday ITH (as qualified under the National Investment Priorities Plan)
 Upon expiry of the Income Tax Holiday - 5% Special Tax on Gross Income and exemption from all national and
local taxes (“Gross Income” refers to gross sales or gross revenues derived from the registered activity , net of
sales discounts, sales returns and allowances and minus cost of sales or direct costs but before any deduction is
made for administrative expenses or incidental losses during a given taxable period)
 Tax and duty-free importation of capital equipment
 VAT Zero Rating on local purchases of goods and services, including land-based telecommunications, electric
power, and water bills
 Exemption from expanded withholding tax

4. Medical Tourism Enterprise

 Four (4) years of Income Tax Holiday on income solely from servicing foreign patients
 Upon expiry of the Income Tax Holiday - 5% Special tax on Gross Income upon in lieu of all national and local
taxes. (“Gross Income” refers to gross sales or gross revenues derived from the registered activity , net of
sales discounts, sales returns and allowances and minus cost of sales or direct costs but before any deduction is
made for administrative expenses or incidental losses during a given taxable period)
 Tax and duty-free importation of medical equipment, including spare parts and equipment supplies, required
for the technical viability and operation of the registered activity/ies of the enterprise.
 VAT Zero Rating on local purchases of goods and services, including land-based telecommunications, electric
power, and water bills
 Exemption from expanded withholding tax

5. Agro-Industrial Economic Zone Enterprise

 Four (4) years of Income Tax Holiday

 Upon expiry of the Income Tax Holiday - 5% Special tax on Gross Income and exemption from all national and
local taxes . (“Gross Income” refers to gross sales or gross revenues derived from the registered activity , net
of sales discounts, sales returns and allowances and minus cost of sales or direct costs but before any deduction
is made for administrative expenses or incidental losses during a given taxable period)
 Tax and duty free importation of production equipment and machineries, breeding stocks, farm implements
including spare parts and supplies of the equipment and machineries
 Exemption from export taxes, wharfage dues, impost and fees
 VAT Zero Rating on local purchases of goods and services, including land-based telecommunications, electric
power, and water bills
 Exemption from payment of local government fees such as Mayor’s Permit, Business Permit, permit on the
Exercise of profession/Occupation/Calling, Health Certificate Fee, Sanitary Inspection Fee, and Garbage Fee

6. Economic Zone Logistics Services Enterprise

 Exemption from duties and taxes on raw materials, semi-finished goods for re-sale to - or for packing/covering,
cutting, altering for subsequent sale to PEZA-registered Export Manufacturing Enterprises, for direct export or
for consignment to PEZA-registered export enterprise.
 VAT Zero Rating on raw materials for checking, packing, visual inspection, storage and shipping to be sourced
locally

7. Economic Zone Developer / Operator

7.a. Manufacturing Economic Zone Developer / Operator

 Special 5% Tax on Gross Income and exemption from all national and local taxes, except real property tax on
land owned by the Econimic Zone Developer. (“Gross Income” refers to gross sales or gross revenues derived
from the registered activity , net of sales discounts, sales returns and allowances and minus cost of sales or
direct costs but before any deduction is made for administrative expenses or incidental losses during a given
taxable period)
 VAT Zero rating of local purchases
 Exemption from expanded withholding tax

7.b. IT Park Developer / Operator

 Special 5% Tax on Gross Income and exemption from all national and local taxes, except real property tax on
land owned by the IT Park Developer. (“Gross Income” refers to gross sales or gross revenues derived from the
registered activity , net of sales discounts, sales returns and allowances and minus cost of sales or direct costs
but before any deduction is made for administrative expenses or incidental losses during a given taxable period)
 VAT Zero rating of local purchases
 Exemption from expanded withholding tax

7.c. Tourism Economic Zone Developer / Operator

 Special 5% Tax on Gross Income and exemption from all national and local taxes, except real property tax on
land owned by the Tourism Economic Zone Developer. (“Gross Income” refers to gross sales or gross revenues
derived from the registered activity , net of sales discounts, sales returns and allowances and minus cost of
sales or direct costs but before any deduction is made for administrative expenses or incidental losses during a
given taxable period)
 VAT Zero rating of local purchases
 Exemption from expanded withholding tax

7.d. Medical Tourism Economic Zone Developer / Operator

 Special 5% Tax on Gross Income and exemption from all national and local taxes, except real property tax on
land owned by Medical Tourism Zone Developer. (“Gross Income” refers to gross sales or gross revenues
derived from the registered activity , net of sales discounts, sales returns and allowances and minus cost of
sales or direct costs but before any deduction is made for administrative expenses or incidental losses during a
given taxable period)
 VAT Zero rating of local purchases
 Exemption from expanded withholding tax
7.e. Agro-Industrial Economic Zone Developer / Operator

 Special 5% Tax on Gross Income and exemption from all national and local taxes, except real property tax on
land owned by the Agro-Industrial Economic Zone Developer. (“Gross Income” refers to gross sales or gross
revenues derived from the registered activity , net of sales discounts, sales returns and allowances and minus
cost of sales or direct costs but before any deduction is made for administrative expenses or incidental losses
during a given taxable period)
 VAT Zero rating of local purchases
 Exemption from expanded withholding tax
7.f. Retirement Economic Zone Developer / Operator

 Special 5% Tax on Gross Income and exemption from all national and local taxes, except real property tax on
land owned by the Retirement Economic Zone Developer. (“Gross Income” refers to gross sales or gross
revenues derived from the registered activity , net of sales discounts, sales returns and allowances and minus
cost of sales or direct costs but before any deduction is made for administrative expenses or incidental losses
during a given taxable period)
 VAT Zero rating of local purchases
 Exemption from expanded withholding tax

8. Facilities Enterprises

8.a. Economic Zone Facilities Enterprise

 Special 5% Tax on Gross Income and exemption from all national and local taxes, except real property tax on
land owned by developers. (“Gross Income” refers to gross sales or gross revenues derived from the registered
activity , net of sales discounts, sales returns and allowances and minus cost of sales or direct costs but before
any deduction is made for administrative expenses or incidental losses during a given taxable period)
 VAT Zero rating of local purchases
 Exemption from expanded withholding tax
8.b. IT Park Facilities Enterprise

 Special 5% Tax on Gross Income and exemption from all national and local taxes, except real property tax on
land owned by developers. (“Gross Income” refers to gross sales or gross revenues derived from the registered
activity , net of sales discounts, sales returns and allowances and minus cost of sales or direct costs but before
any deduction is made for administrative expenses or incidental losses during a given taxable period)
 VAT Zero rating of local purchases
 Exemption from expanded withholding tax

8.c. Retirement Economic Zone Facilities Enterprise

 Special 5% Tax on Gross Income and exemption from all national and local taxes, except real property tax on
land owned by developers. (“Gross Income” refers to gross sales or gross revenues derived from the registered
activity , net of sales discounts, sales returns and allowances and minus cost of sales or direct costs but before
any deduction is made for administrative expenses or incidental losses during a given taxable period)
 VAT Zero rating of local purchases
 Exemption from expanded withholding tax

9. Economic Zone Utilities Enterprise

 Special 5% Tax on Gross Income and exemption from all national and local taxes, except real property tax on
land owned by developers. (“Gross Income” refers to gross sales or gross revenues derived from the registered
 activity , net of sales discounts, sales returns and allowances and minus cost of sales or direct costs but before
any deduction is made for administrative expenses or incidental losses during a given taxable period)
 VAT Zero rating of local purchases
 Exemption from expanded withholding tax

BOI

The Philippine Board of Investments (BOI), an attached agency of Department of Trade and Industry (DTI), is the lead government
agency responsible for the promotion of investments in the Philippines.

Taking the lead in the promotion of investments, BOI assists Filipino and foreign investors to venture and prosper in desirable areas of
economic activities. Investors are welcome to experience the potentials of the booming Philippine Industry sectors. Profitable business
opportunities abound in the food processing, construction, metal products, telecommunications, power and infrastructure projects
among others.

Investment Priority Areas

 Business Process Outsourcing
 Electronics Industry
 Renewable Energy
 Shipbuilding
Incentives
 Fiscal Incentives
o Income Tax Holiday
o Exemption from taxes and duties on imported spare parts(NOLCO)
o Exemption from wharfage dues and export tax, duty, impost and fees(GIE)
o Reduction of the Rates of Duty on Capital Equipment, Spareparts and Accessories by Virtue of EO 528
o Tax exemption on breeding stocks and genetic materials
o Tax Credits
o Additional deductions from Taxable Income
 Non-Fiscal Incentives
o Employment of Foreign Nationals
o Simplification of customs procedures
o Importation of consigned equipment
o Privilege to operate a bonded manufacturing/trading warehouse

Tax incentives for care-givers of PWDs

SUMMARY
Those caring for and living with a person with disability, whether parent or care-giver, shall be granted incentives in
accordance with the provisions of the National Internal Revenue Code, as amended. For purposes of granting the
incentives, persons with disability shall be treated as dependents under Section 35(A) of the National Internal Revenue
Code, as amended, and as such, individual taxpayers providing care for them shall be accorded the privileges granted by
the Code insofar as having dependents under the same section are concerned.

Incentives to Registered Firms

Incentives / privileges may be enjoyed only upon registration. In general, registered enterprises are entitled to the
following incentives:
 Incentives to Registered Firms
Incentives / privileges may be enjoyed only upon registration. In general, registered enterprises are entitled to the following incentives:

Tax Exemption
1. Income Tax Holiday (ITH)
a. BOI-registered enterprises shall be exempt from the payment of income taxes reckoned from the scheduled start of commercial
operations as follows -
 New projects with a pioneer status for six (6) years
 New projects with a non-pioneer status for four (4) years
 Expansion projects for three (3) years. As a general rule, exemption is limited to incremental sales revenue/volume.
 New or expansion projects in less developed areas for six (6) years, regardless of status
 Modernization projects for three (3) years. As a general rule, exemption is limited to incremental sales revenue / volume.
b. The income tax holiday is limited to the following cases -
 Export traders may be entitled to the ITH only on their income derived from the following -
 export of new products i.e. those which have not been exported in excess of USD100,000.00 in any of the two
years preceding the filing of application for registration, or
 export to new markets i.e. to a country where there has been no recorded import of a specific export product in
any of the two (2) years preceding the application for registration
 Mining Activities -
 the exploration and development of mineral resources are not entitled to ITH
 Mining and/or quarrying without mineral processing is not entitled to ITH
 Mining and processing of aggregates is not entitled to ITH
2. New registered pioneer and non-pioneer enterprises and those located in the less developed areas (LDA) may avail themselves of a bonus
year in each of the following cases-
 The indigenous raw materials used in the manufacture of the registered product must at least be fifty percent (50%) of the total
cost of raw materials for the preceding years prior to the extension unless the Board prescribes a higher percentage
 The ratio of the total imported and domestic capital equipment to the number of workers for the project does not exceed
USD10,000 to one (1) worker
 The net foreign exchange savings or earnings amount to at least USD500,000 annually during the first three (3) years of operation.
In no case shall the registered pioneer firm avail itself of this incentive for a period exceeding eight (8) years.

3. Exemption from taxes and duties on imported spare parts - A registered enterprise with a bonded manufacturing warehouse shall be
exempt from custom duties and national internal revenue taxes on its importation of required supplies / spare parts for consigned equipment
or those imported with incentives.
4. Exemption from wharfage dues and export tax, duty, impost and fees - All enterprises registered under the 1999 IPP will be given a ten
(10) - year period from date of registration to avail themselves of the exemption from wharfage dues and any export tax, impost and fees on
its non-traditional export products.
5. Tax exemption on breeding stocks and genetic materials - Agricultural producers will be exempted from the payment of all taxes and
duties on their importation of breeding stocks and genetic materials within ten (10) years from the data of registration or commercial
operation.
Tax Credits
1. Tax credit on tax and duty portion of domestic breeding stocks and genetic materials - A tax credit equivalent to one hundred percent
(100%) of the value of national internal revenue taxes and customs duties on local breeding stocks within ten (10) years from date of
registration or commercial operation for agricultural producers.
2. Tax credit on raw materials and supplies - A tax credit equivalent to the national internal revenue taxes and duties paid on raw materials,
supplies and semi-manufacture of export products and forming part thereof shall be granted to a registered enterprise.
Additional Deductions from Taxable Income
1. Additional deduction for Labor Expense (ADLE) - For the first five (5) years from registration, a registered enterprise shall be allowed an
additional deduction from taxable income equivalent to fifty percent (50%) of wages of additional skilled and unskilled workers in the
direct labor force. This incentive shall be granted only if the enterprise meets a prescribed capital to labor ratio and shall not be availed
simultaneously with ITH. This additional deduction shall be doubled if the activity is located in an LDA.
2. Additional deduction for necessary and major infrastructure works - Registered enterprises located in LDAs or in areas deficient in
infrastructure, public utilities and other facilities may deduct from taxable income an amount equivalent to the expenses incurred in the
development of necessary and major infrastructure works. This privilege, however, is not granted to mining and forestry-related projects as
they would naturally be located in certain areas to be near their sources of raw materials.
Non-Fiscal Incentives
1. Employment of foreign nationals - A registered enterprise may be allowed to employ foreign nationals in supervisory, technical or advisory
positions for five (5) years from date of registration. The positions of president, general manager and treasurer of foreign-owned registered
enterprises or their equivalent shall, however, not be subject to the foregoing limitations.
2. Simplification of customs procedures for the importation of equipment, spare parts, raw materials, and supplies and exports of processed
products.
3. Importation of consigned equipment for a period of ten (10) years from date of registration, subject to posting of a re-export bond.
4. The privilege to operate a bonded manufacturing / trading warehouse subject to Customs rules and regulations.

REPUBLIC ACT NO. 6135

REPUBLIC ACT NO. 6135 - AN ACT TO INVIGORATE THE COUNTRY'S EXPORT TRADE AS A MEANS OF ACCELERATING
ECONOMIC GROWTH BY GRANTING CERTAIN INCENTIVES AND EXEMPTIONS TO REGISTERED EXPORT PRODUCERS,
EXPORT TRADERS, AND SERVICE EXPORTERS, REPEALING EXPORT INCENTIVES GRANTED UNDER REPUBLIC ACT
NUMBERED FIFTY-ONE HUNDRED EIGHTY-SIX, AND FOR OTHER PURPOSES

Section 1. Short Title. — This Act shall be known and cited as the "Export Incentives Act of 1970."

Sec. 2. Declaration of Policy. — It is the policy of the State to actively encourage, promote, and diversify exports of
services and of manufactures utilizing domestic raw materials to the fullest extend possible, and to develop new
markets for Philippine products, in order to attain a rising level of production and employment, increase foreign
exchange earnings, hasten the economic development of the nation, and assure that the benefits of development
accrue to the Filipino people.

Sec. 3. Definition of Terms. — For purposes of this Act:

(a) "Board of Investments" or simply "Board" shall mean the Board of Investments created by Republic Act Numbered
fifty-one hundred eighty-six, known as the Investment Incentives Act.

(b) "Registered export producer" shall mean any person, corporation, partnership or other entity organized and
existing under Philippine laws, (1) registered with the Board in accordance with this Act, (2) engaged or proposing to
engage in the manufacture or processing of export products as hereinbelow defined, and (3) directly exporting its export
products, or selling them (a) to a registered export trader that subsequently exports the said products, or (b) to other
export producers who utilize said products as direct inputs in products subsequently manufactured or processed by
them and thereafter exported.

(c) "Registered export trader" shall mean any person, corporation, partnership or other entity organized and existing
under Philippine laws, (1) registered with the Board in accordance with this Act and (2) which derived at least fifty per
cent (50%) of its gross income for the year in which the incentives are claimed, from the sale abroad of export products
bought by it from two or more registered export producers which are not owned, controlled, or managed by the same
person or entity or group of persons or entities: provided, that, if the export trader is itself owned, controlled or
managed by a person or entity, or a group of persons or entities that also own, control or manage another enterprise
engaged in manufacturing or processing products that are not export products or in buying and selling goods within the
Philippines, the percentage of export sales shall be based upon the combined or consolidated gross income of the export
trader and said other enterprise.
(d) "Registered service exporter" shall mean a person, corporation, partnership or other entity organized and existing
under Philippine laws, (1) registered with the Board in accordance with this Act and (2) engaged or proposing to engage
in (a) rendering technical, professional or other services which are paid for in foreign currency, including, but not limited
to, the fields of law, medicine, accounting, management, valuation and appraisals, engineering, construction, geodetics,
surveying, teaching, pharmacy, nursing, cultural presentations or promotions, works of arts, and entertainment; or (b) in
exporting television and motion pictures and musical recordings made or produced in the Philippines, either directly or
through a registered export trader.

(e) "Export products" shall mean manufactured or processed products: (1) not more that eighty per cent (80%) of
whose individual F.O.B. Philippine port value is attributable to imported law materials, but said maximum percentage
may, after three (3) years from the enactment of this Act, progressively be decreased by the Board of Investments at
such annual rate as may be warranted by technological advancement, the availability of domestic raw materials, and
similar factors; (2) the total F.O.B. Philippine port value of the exports of which did not exceed five million dollars in
United States currency in the calendar year 1968; and (3) which meet standards of quality set by the Bureau of
Standards or, in default of such standards, by the Board or by such public or private organization, chamber, group or
body as the Board may designate.

( f ) "Export sale" shall mean the Philippine port F.O.B. value, determined from invoices, bills of lading, inward letters of
credit, landing certificates and other commercial documents, of export products exported directly by a registered export
producer or registered export trader, or the net selling price of export products sold by a registered export producer to a
registered export trader who subsequently exports the same; but sales of export products to a registered export trader
shall only be deemed export sales when actually exported by the latter as evidenced by landing certificates or similar
commercial documents. Exportation of goods on consignment shall not be deemed export sales until the export
products consigned are in fact sold by the consignee.

(g) "Export fees" shall mean the total foreign exchange which is charged or received by a registered service exporter
for furnishing or performing services, or permitting the showing or playing, outside of the Philippines, of television or
motion pictures or musical recordings.

(h) "Production cost" shall mean the total of the cost of direct labor, raw materials, and manufacturing overhead,
determined in accordance with generally accepted accounting principles, which are incurred in manufacturing or
processing the products of a registered export producer.

(i) "Processing" shall mean converting raw materials into marketable form by a special treatment or a series of actions
that results in a change of the nature or state of the products, such as by slaughtering, milling, pasteurizing, drying or
desiccating, quick freezing, and the like. Merely packing, packaging, or sorting out and classifying shall not, by
themselves, constitute processing.

Sec. 4. Export Priorities Plan. — Within one hundred twenty days after this Act takes effect, and annually thereafter as
part of the annual investment priorities plan provided in Section 18 of Republic Act Numbered Fifty-one hundred eighty-
six, known as the Investment Incentives Act, the Board shall submit to the President, through the National Economic
Council, an export priorities plan setting forth the export products that should be encouraged with priority, considering:

(a) The comparative advantage they enjoy or could be made to enjoy;

(b) Their potential for earning foreign exchange; and

(c) Their profitability to the national economy.

The export priorities plan shall be acted upon and take effect, and may be amended, following the procedure for, and
with like effect as, the said investments priorities plan.
Sec. 5. Incentives for Investors. — In addition to the basic rights and guaranties set forth in Sec. 4 of Republic Act
Numbered Fifty-one hundred eighty-six, known as the Investment Incentives Act, investors in enterprises that are
registered as export producers, export traders or service exporters shall enjoy the incentives set forth in Sec. 5 of the
Act; and Philippine nationals investing in registered export producers that are pioneer enterprises shall also enjoy the
incentives set forth in Sec. 6 of said Act.

Sec. 6. Conditions for Availment of Incentives. — (a) No export producer, service exporter or export trader shall be
entitled to any incentive under this Act until its registration shall have been approved by the Board, which approval shall
retroact to the date of filing of the application for registration.

(b) To be entitled to registration, an applicant must satisfy the Board that (1) he is a citizen of the Philippines, in case
the applicant is a natural person; or that at least sixty per cent of its capital is owned and controlled by citizens of the
Philippines, in case the applicant is a corporation, partnership or other entity; (2) that it is engaged or proposes to
engage in manufacturing, processing or exporting export products listed in the export priorities plan or if not so listed,
that at least fifty per cent of its sales are export sales; or in case of a service exporter, that is engaged or proposes to
engage in rendering services payable in foreign currency, or in exporting television or motion pictures or musical
recordings produced or made in the Philippines; (3) that it is not engaged and will not engage in any of the activities
reserved by the Constitution or the laws of the Philippines to Filipino citizen or corporations owned and controlled by
Filipino citizens, unless and until the applicant can fulfill the requirements of the Constitution or said laws; and (4) that if
the applicant is engaged or proposes to engage in activities other than the manufacture, processing and exportation of
export products, or in rendering services other than export services, it has installed or undertakes to install an adequate
accounting system to segregate the investment, revenues, sales, receipts, purchases, payrolls, costs, expenses, and
profits and losses of its export operations from those of its domestic operations: provided, that in the case of a pioneer
enterprise registered or that may hereafter be registered under Republic Act Numbered Fifty-one hundred eighty-six,
the national requirement shall be in accordance with Section 19 of the said Act instead of Sec. 6 (b) of this Act: provided,
further, that upon receipt of the application for registration, the Board shall, within thirty days, notify the applicant of all
pertinent requirements not complied with: and provided, finally, that the Board of Investments shall act on said
application within ninety days after submission thereof.

(c) A citizen of the Philippines or a corporation, partnership or other entity organized and existing under Philippine
laws, at least seventy per cent (70%) of the capital of which is owned and controlled by citizens of the Philippines, shall
also be entitled to registration as an export trader and to enjoy the benefits and incentives for registered export traders
under this Act, except exemption from export tax, if it is engaged or proposes to engage in the exportation of export
products the total F.O.B. Philippine port value of the exports of which exceeded five million dollars in United States
currency in the calendar year 1968: provided, that, (a) the business of exportation of the said product, at the time the
application for registration is filed, is substantially in the hands of persons that are not citizens of the Philippines or
entities that are not owned and controlled by citizens of the Philippines; and (b) the applicant fulfills the other
requirements, not inconsistent with those set forth in this paragraph, that are not set forth in the preceding paragraph
and in paragraphs (c) and (e) of Sec. 3 of this Act.

Sec. 7. Incentives to Registered Export Producers. — Registered export producers unless they already enjoy the same
privileges under other laws shall be entitled to the incentives set forth in paragraph (h), (i) and (j) of Sec. 7 of Republic
Act Numbered Fifty-one hundred eighty-six, known as the Investment Incentives Act; and registered export producers
that are pioneer enterprises shall be entitled also to the incentives set forth in paragraph (a), (b) and (c) of section 8 of
the said Act.n addition to the said incentives, and in lieu of other incentives provided in Sec. 7 and in Sec. 9 of that Act,
registered export producers shall be entitled to benefits and incentives as enumerated hereunder:

(a) Tax Credit. — Every registered export producer shall enjoy, for a period of ten (10) years from its registration, a tax
credit equivalent to the sales, compensating and specific taxes and duties on the supplies, raw materials and semi-
manufactured products used in the manufacture, processing or production of its export products and forming part
thereof, whether exported directly by the registered export producer or sold to another export producer, which uses
such sold product as a direct input in export products manufactured or processed by it and subsequently exported, or to
a registered export trader: provided, that the tax credit shall accrue to the registered export producer only after the
other export producer or registered export trader has in fact exported the products of the export producer or those in
the manufacture or processing of which the former were used. The tax credit shall be issued by the Secretary of Finance
upon presentation of the export documents, and shall be in lieu of refunds.t may be used to pay taxes, duties, charges
and fees due to the national government in connection with its operations. A tax credit shall be non-transferable, except
when such transfer is by hereditary succession or occurs by operation of law; it may be used by the person or entity to
whom it is issued only for as long as it enjoys the benefits and incentives provided for in this Act; and may not be used so
as to result in a refund.

b) Reduced Income Tax. — Every registered export producer shall be entitled for the first five years from its
registration, to deduct from its taxable income an amount equivalent to a portion of the total export revenue for a
particular year, computed in accordance with the following tax incentive formula:

Total export revenue multiplied by the product of the labor component, the domestic raw material component, and five:
provided, that, (1) the total export revenue shall be F.O.B. Philippine port; and shall be the increment of its export sale
over its sale for the year 1968; (2) the labor component shall be the total direct labor wage bill divided by the total
production cost of the firm; (3) the domestic raw material component shall be the difference between one unit of
production and the ratio of the total value of imported raw materials and supplies to the total production cost of the
firm: provided, further, that the reduction from taxable income shall not exceed one hundred per cent (100%) of its total
export revenue for each particular year during the first three (3) years and fifty per cent (50%) during the succeeding
two (2) years.

c) Tax Exemption on Imported Capital Equipment. — Within five years from registration of the export producer,
importations of machinery and equipment and spare parts shipped with such machinery and equipment shall not be
subject to tariff duties and compensating tax: provided, that, (1) said machinery, equipment and immediate component
spare parts are not manufactured domestically in commercial quantity and quality or sold at reasonable prices; (2) are
directly and actually needed and will be used by the registered export producer in the manufacture, processing, handling
and storage of its export products; (3) are covered by shipping documents in the name of the registered export producer
to whom the shipment will be delivered direct by customs authorities; (4) the prior approval of the Board was obtained
by the registered export producer before placing the order for the importation of such machinery, equipment and
immediate component spare parts; and (5) the registered export producer chooses not to avail of the privileges granted
by Republic Act Numbered Thirty-one hundred twenty-seven, as amended.n granting approval of importations under
this paragraph, the Board shall require international bidding to be conducted by the end-user in Manila under its
supervision; however, the Board may, in its discretion, dispense with this requirement if (a) there is, to the knowledge of
the Board, only one manufacturer of the machinery, equipment and spare parts to be imported, or (b) the importation is
caused by the expansion of the registered export producer and such imports shall be acquired from the same
manufacturer who supplied the machinery, equipment and spare parts being used by the registered export producer or
(c) the total cost of importation is less than one million dollars ($1,000,000.00).f the registered export producer does not
bring into the country, the proceeds of export sales equivalent to at least the cost of the imported machinery,
equipment and spare parts with five (5) years after delivery of the same to it, or if it sells, transfers, or disposes of the
machinery and equipment and spare parts imported under this paragraph without the prior approval of the Board
within the said five (5) years, the registered export producer shall pay twice the amount of exemption given it, together
with the penalty and interest thereon, computed from the date of acquisition, fixed by the Tariff and Customs Code and
the National Internal Revenue Code for delinquency in the payment of said duties and taxes. However, the Board shall
allow and approve the sale, transfer, or disposition of the said items within the said period of five (5) years if made: (1)
to another registered export producer; (2) for reasons of proven technical obsolescence; or (3) for purposes of
replacement to improve or expand the operations of the registered export producer.

d) Tax Credit on Domestic Capital Equipment. — A tax credit equivalent to one hundred per cent (100%) of the value of
the compensating tax and customs duties that would have been paid on the machinery, equipment and spare parts had
these items been imported shall be given to the registered export producer which purchases machinery, equipment and
spare parts from a domestic manufacturer, and a tax credit equivalent to fifty per cent (50%) thereof shall be given to
the said manufacturer; provided, that the said machinery, equipment and spare parts are directly and actually needed
and will be used by the registered export producer in the manufacture, handling and storage of its export products; that
prior approval of the Board was obtained by the local manufacturer concerned; and that the sale is made within ten (10)
years from the date of registration of the registered export producer.f the registered export producer sells, transfers or
disposes of the machinery, equipment and spare parts without the prior approval of the Board within five (5) years from
the date of acquisition thereof, the registered export producer shall pay twice the amount of the tax credit given it.
However, the Board shall allow and approve the sale, transfer or disposition of the items within the said period of five
(5) years if made (1) to another registered export producer; (2) for reasons of proven technical obsolescence; or (3) for
purposes of replacement to improve and/or expand the operations of the registered export producer.

The tax credit shall be issued to and may be used by the registered export producer and the domestic manufacturer as
provided in paragraph (a) of this section.

(e) Exemption from Export Tax. — Exports by a registered export producer of an export product, the total F.O.B.
Philippine port value of the exports of which in calendar year 1968 were less that five million dollars in United States
currency by which exceed said total during a period of five (5) years from registration, shall be exempted from any
export tax, including the stabilization tax imposed by Republic Act Numbered Sixty-one hundred twenty-five.

Sec. 8. Incentives to Registered Export Traders. — A registered export trader shall be entitled (a) to the exemption
from export tax provided in paragraph (e) of Sec. 7 of this Act; (b) to a tax credit equivalent to the amount of specific and
sales taxes on the export products bought by it from registered export producers and subsequently exported; (c) for the
first three (3) years from registration, to deduct from its taxable income, in addition to the normal deduction allowed by
the National Internal Revenue Code, an amount equivalent to ten per cent (10%) of the increment of its total export
sales over seventy-five per cent (75%) of its total 1968 export sales; and (d) thereafter, and until the fifth year after
registration, to a similar deduction based on the increment of its annual total export sales over its average annual total
export sales during the preceding five years. For a period of five years after registration, an additional deduction of one
per cent (1%) shall be allowed a registered export trader who extends financial assistance to a registered export
producer or producers in an amount equivalent to not less than twenty per cent (20%) of the registered export trader's
total export sales during the year in which the incentive is claimed.

Sec. 9. Additional Incentives. — (a) The Board shall grant additional incentives whenever a registered export producer
establishes its processing or manufacturing plant in an area that the Board designates as necessary for the proper
dispersal of industry or in an area which the Board finds deficient in infrastructure, public utilities, and other facilities.
These additional incentives shall consist of any, some or all of the following: (a) to use an amount equivalent to double
its direct labor cost in applying the formula for reduced income tax provided in paragraph (b) of Sec. 7 and this Act; (2)
to use a constant factor of six (6) instead of five (5) in applying the said formula; (3) to apply in payment of taxes that
may be due from it to the National Government, an amount equivalent to one hundred per cent (100%) of necessary
infrastructure works, in harmony with projects approved by law, undertaken by the registered export producer with the
prior approval of the Board and the concurrence of the Department of Public Works and Communications, under the
same terms and conditions set forth in Section 1 of Republic Act Numbered Fifty-two hundred seventy-nine, such as,
portworks, waterworks, aircraft landing facilities, roads and bridges leading from the plant to a loading point or to a
national highway or poblacion, and other similar projects that are normally undertaken by the government: provided,
that the title to all such infrastructure works shall upon completion, be transferred to the Philippine government:
provided, further, that should the registered export producer undertake necessary maintenance work on such
infrastructure works with the prior approval of the Board, a similar incentive shall be given to it in an amount equivalent
to the cost of such necessary maintenance.

(b) Whenever a registered export producer or export trader shall use a new brand name for an export product that
distinguishes it from products manufactured or processed outside the Philippines, the Board shall grant the registered
export producer directly exporting its product or export trader who exports the same an additional incentive in the form
of either (1) a net operating loss carry-over as provided for in Sec. 7, paragraph (e) of Republic Act Numbered Fifty-one
hundred eighty-six, known as the Investment Incentives Act; or (2) an additional deduction from taxable income
equivalent to one per cent (1%) of the increment of its export sales during the year in which the incentive is claimed,
determined in the manner provided in paragraphs (b) and (c) of Sec. 7 of this Act: provided, that the registered export
producer or export trader shall choose at the time of applying for said additional incentives which of the two incentives
he prefers to enjoy, and such choice shall be binding.

SECTION 10. Incentives to Registered Service Exporters. — Every registered service exporter shall, for the first five
years from registration, be entitled to deduct from its taxable income an amount equivalent to fifty per cent (50%) of
the increment of its total export fees during the year in which the incentives is claimed over seventy five per cent (75%)
of its total export fees in 1969; and thereafter, and until the tenth year after registration, to a similar deduction based
on the increment of annual total export fees over its average annual total export fees during the preceding five years:
provided, that to be entitled to this deduction, the registered service exporter must have remitted or repatriated to the
Philippines its total export fees earned during the year in which the incentive is claimed, less reasonable costs and
expenses incurred or payable in foreign currencies, under such rules and regulations as the Monetary Board may
prescribe.n addition, for a period of ten years from registration, a registered service exporter who produces television or
motion pictures, or musical recording, in the Philippines, and exports the picture or recording directly or through a
registered export trader shall also be entitled (a) to a tax credit equivalent to the amount of specific, compensating and
sales taxes and duties paid by it on the raw materials and supplies used in producing the picture or recording that is
exported; and (b) to exemption from payment of customs duties and compensating taxes on importations of equipment,
machinery or spare parts shipped with such machinery and equipment that (1) are not manufactured domestically in
reasonable quantity and quality or sold at reasonable prices; (2) are directly and actually needed and will be used by the
registered service exporter in producing or making the pictures or recordings that it exports; (3) are covered by shipping
documents in the name of the registered service exporter to whom the shipment will be delivered direct by customs
authorities; (4) have the approval of the Board of Investment obtained by the registered service exporter before placing
the order for the importation; and (5) are the subject of international bidding, under the supervision of the Board, unless
the Board dispenses with this condition for any of the reasons set forth in Sec. 7, paragraph (c) of this Act.f the
registered service exporter does not bring into the Philippines export fees equivalent to at least the cost of the imported
machinery, equipment and spare parts within five (5) years after delivery of the same to it, or if it sells, transfers, or
disposes of the same or any part thereof, without prior approval of this Board, within said five (5) years, it shall pay
twice the amount of the exemption given it, together with the penalty and interest thereon, computed from the date of
delivery, fixed by the Tariff and Customs Code and the National Internal Revenue Code for delinquency in the payment
of duties and taxes. However, the Board shall allow and approve the sale, transfer or disposition within the said period
of five (5) years, if the registered service exporter has brought into the Philippines export fees during the period it has
held the equipment which amount to twenty per cent (20%) of the cost of the equipment for each year in which it has
held the equipment; and if made (1) to another registered service exporter of pictures and recordings; (2) for reasons of
proven technical obsolescence; or (3) for purposes of replacement to improve or expand the operations of the
registered service exporter.

SECTION 11. Export Assistance Fund. — One per cent (1%) of the total collections from the tax provided for by Republic
Act Numbered Sixty-one hundred twenty-five, to be deducted from the portion allocated to the Development Bank of
the Philippines, shall be set aside as an Export Assistance Fund which shall be administered by the Board and expended
for in the pursuance of specific appropriations to be provided for in the annual General Appropriations Act to implement
programs, projects and activities exclusively for the following purposes:

1. Diversification of export products and export markets;

2. Improving existing methods of production so as to reduce the cost of export products;

3. Raising the quality and level of exports and assisting in the establishment of export standards;

4. Promoting effective marketing of export products abroad;

5. Developing of export packaging and design;

6. Establishing an Institute of Export Development which shall conduct seminars and training courses for manpower in
the direct production of exports, Philippine trade missions and registered service exporters, export producers, or export
traders and their personnel, and assisting cultural missions that may promote Philippine products and arts abroad; and

7. Such other undertakings as may be necessary to implement this Act and achieve its purposes: provided, that no
portion of this fund shall be utilized for travel abroad.
The Central Bank shall turn over and deliver, immediately upon collection, the portion of the tax constituting the fund to
the Board.

SECTION 12. Incentives for Export Enterprises in Foreign Trade zones. — An export producer who manufactures,
assembles or processes its products solely for export, an export trader, or service exporter within foreign trade zones
that now or hereafter may exist by authority of law, if qualified and registered under this Act, is hereby extended the
applicable benefits and incentives in this Act: provided, that the particular products exported under a specific patent,
trade mark or trade name are not manufactured, assembled, or processed by an existing licensee of such products in the
Philippines.

SECTION 13. Suspension or Cancellation of Incentives. — Any provision of law to the contrary notwithstanding, the
Board of Investments may suspend or cancel wholly or partially any export incentive granted under this Act whenever
(1) there is any violation of this Act or of any law for the protection of labor; or (2) whenever any action is threatened or
taken by an international association or foreign nation which would nullify the incentive, and would impair or threaten
to impair the export trade of the Philippines or its relations with other nations; or (3) when the registered export
enterprise has a paid-up capital of at least five hundred thousand pesos (P500,000.00) and earns for at least two (2)
years profits from its exports of products or services in excess of thirty-three and one-third percent (33 1/3%) of equity
even without these incentives.

SECTION 14. Issuance of Implementing Rules and Regulations. — The Board of Investments shall issue such rules and
regulations as may be necessary for the proper implementation of the provisions of this Act within sixty (60) days after
its approval. For this purpose, and with a view to coordinating trade and industrial development, the Board may call
upon other government agencies for assistance and cooperation. Such rules and regulations shall take effect thirty days
after their publication in two (2) newspapers of general circulation in the Philippines.

SECTION 15. Expediting Export Procedure. — Subject to the approval of the President, the Board of Investments, in
consultation with the National Export Coordinating Center, shall issue rules and regulations to expedite and simplify the
procedure for exports of registered export producers, registered service exporters, and registered export traders, who
are hereby exempted from the requirements of obtaining clearances or certificates from national or local governments
or agencies for their export products imposed by existing laws, executive orders, ordinances, rules and regulations, and
who shall be subject only to such requirements for clearances or certifications as may be provided in the said
promulgated rules and regulations. The said rules and regulations shall take effect thirty days after publication in two (2)
newspapers of general circulation in the Philippines.

SECTION 16. Suppletory Effect of Investment Incentives Act. — Republic Act Numbered Fifty-one hundred eighty-six,
known as the Investment Incentives Act, as far as applicable and not inconsistent with the provisions of this Act, shall
apply to enterprises registered under this Act.

SECTION 17. Enterprises Registered Under Republic Act Numbered Fifty-one Hundred Eighty-six. — Any corporation
registered under Republic Act Numbered Fifty-one hundred eighty-six, shall continue to be governed by the provisions
of said Act, but it shall have the option to register under the provisions of this Act: provided, that the benefits of this Act,
so far as may be applicable, shall be given prospective effect from the date of its registration under this Act. Provided,
further, that nothing herein contained shall be construed to entitle further an enterprise to the benefits granted under
Republic Act Numbered Fifty-one hundred eighty- six after its registration under this Act.
SECTION 18. Appropriations. — (1) The sum of three million five hundred thousand pesos, or so much thereof as may
be necessary, is hereby appropriated out of the Export Assistance Fund, to implement the programs, projects and
activities to carry out the purposes authorized in Section 11 of this Act during fiscal year nineteen hundred seventy-one;

(2) To carry out the purposes of this Act, there is hereby appropriated the sum of one million pesos for the fiscal year
nineteen hundred seventy-one as supplementary to the appropriations for the Board of Investments; and

(3) Thereafter, the necessary appropriations shall be included in the annual General Appropriations Act.

SECTION 19. Penal Provision. — Violation of any provision of this Act, or of the terms or conditions of registration, or
the rules and regulations promulgated pursuant thereto, or the act of abetting or aiding in any manner any such
violation, shall be punished by a fine in the amount of not more that fifty thousand pesos (P50,000) or imprisonment for
not more than three (3) years, or both, at the discretion of the Court.f the offender is a government official, the
maximum of the penalty hereinbelow prescribed shall be imposed and the offender shall suffer the additional penalty of
perpetual disqualification from public office, without prejudice to any administrative action against him. Furthermore,
where there is a clear case of favoritism or abuse of discretion, the members of the Board and the Chairman shall each
be liable for such violation by a fine of fifty thousand pesos and imprisonment of not less than three years.

If the offense be committed by a juridical entity, its president and/or other officials responsible therefore shall be
subject to the penalty described above.f the official be an alien, he shall be deported after serving the sentence, without
need of further proceedings for deportation.f the offender is a naturalized citizen, he shall be automatically
denaturalized from the date his sentence becomes final.

Payment of the tax due after apprehension shall not constitute a valid defense in any prosecution for violation of any
provision of this Act.

Sec. 20. Repealing Clause. — Without prejudice to the right of any enterprise which, at the time of the effectivity of
this Act, has been registered under Republic Act Numbered Fifty-one hundred eighty-six, known as the Investment
Incentives Act, to be governed under the provisions of that Act, as provided in Section 16 hereof, or any other right
acquired prior to the effectivity of this Act, Sec. 9 of Republic Act Numbered Fifty-one hundred eighty-six and those
portions of Section 18 and 20 that make reference to exports are hereby repealed, and all Acts, executive orders,
administrative orders, rules and regulations or parts thereof inconsistent with the provisions of this Act are likewise
repealed or modified accordingly.

Sec. 21. Separability Clause. — The provisions of this Act are hereby declared to be separable, and in the event one or
more of such provisions are held unconstitutional, the validity of other provisions shall not be affected.

Sec. 22. Effectivity. — This Act shall take effect upon its approval.